what is blockchain technology? a step-by-step guide for beginners

WHAT IS BLOCKCHAIN

TECHNOLOGY?

A STEP-BY-STEP GUIDE FOR

BEGINNERS

THE BLOCKCHAIN IS AN INCORRUPTIBLE

DIGITAL LEDGER OF ECONOMIC

TRANSACTIONS THAT CAN BE

PROGRAMMED TO RECORD NOT JUST

FINANCIAL TRANSACTIONS BUT VIRTUALLY

EVERYTHING OF VALUE

• Picture a spreadsheet that is duplicated thousands of times across a network of computers

• Information held on a blockchain exists as a shared — and continually reconciled — database

• This is a way of using the network that has obvious benefits

• The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable

• Its data is accessible to anyone on the internet

A DISTRIBUTED

DATABASE

• The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it

• With Google Docs (or Google Sheets), both parties have access to the same document at the same time

• It is like a shared ledger, but it is a shared document

• The distributed part comes into play when sharing involves a number of people

BLOCKCHAIN

AS GOOGLE

DOCS

• Blockchain technology is like the internet in that it has a built-in robustness

• Be controlled by any single entity

• Has no single point of failure

• Bitcoin was invented in 2008. Since that time, the Bitcoin blockchain has operated without significant disruption

• The internet itself has proven to be durable for almost 30 years

DURABILITY

AND

ROBUSTNESS

• The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes

• Transparency ,data is embedded within network as a whole, by definition it is public

• It cannot be corrupted altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network

TRANSPARENT

AND

INCORRUPTIBLE

• Blockchain solves the problem of manipulation

• When I speak about it in the West, people say they trust Google, Facebook, or their banks

• But the rest of the world doesn’t trust organizations and corporations that much

• It’s not about the places where people are really rich. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet

SOLVES THE

PROBLEM OF

MANIPULATION

• A network of so-called computing “nodes” make up the blockchain

• Every node is an “administrator” of the blockchain, and joins the network voluntarily

• Nodes are said to be “mining” Bitcoin, but the term is something of a misnomer

• Bitcoin was the raison d’etre of the blockchain as it was originally conceived

A NETWORK OF

NODES

• By design, the blockchain is a decentralized technology

• By creating a new way to verify transactions aspects of traditional commerce could become unnecessary

• Stock market trades become almost simultaneous on the blockchain

• Decentralization is already a reality

• Decentralization means the network operates on a user-to-user (or peer-to-peer) basis

THE IDEA

OF

DECENTRALIZATION

• As web infrastructure, you don’t need to know about the blockchain for it to be useful in your life

• Currently, finance offers the strongest use cases for the technology

• The World Bank estimates that over $430 billion US in money transfers were sent in 2015

• Transactions online are closely connected to the processes of identity verification

• It is easy to imagine that wallet apps will transform in the coming years to include other types of identity management

WHO WILL USE

THE

BLOCKCHAIN?

• Store your data on the blockchain and it is incorruptible

• Today’s internet has security problems that are familiar to everyone mainly on “username/password” system to protect our identity and assets online

• Blockchain security methods use encryption technology

• The basis for this are the so-called public and private “keys”

• A “public key” is a users’ address on the blockchain

• The “private key” is like a password that gives its owner access to their Bitcoin or other digital assets

ENHANCED

SECURITY

• With blockchain technology, the web gains a new layer of functionality

• Bitcoin transactions in 2016 averaged over $200,000 US per day

• With the added security brought by the blockchain new internet business are on track to unbundle the traditional institutions of finance

• Goldman Sachs believes that blockchain technology holds great potential especially to optimize clearing and settlements

A SECOND-LEVEL

NETWORK

WEB 3.0

THE BLOCKCHAIN GIVES

INTERNET USERS THE ABILITY TO

CREATE VALUE AND AUTHENTICATE

DIGITAL INFORMATION.

WHAT NEW BUSINESS APPLICATIONS

WILL RESULT?

Distributed ledgers enable the coding of simple contracts that will execute when specified conditions are met

SMART CONTRACTS

By enabling peer-to-peer payments, the blockchain opens the door to direct interaction between parties — a truly decentralized sharing economy results

THE SHARING ECONOMY

Blockchains take this interest to the next level, potentially creating crowd-sourced venture capital funds

CROWD FUNDING

By making the results fully transparent and publicly accessible, distributed database technology could bring full transparency to elections or any other

kind of poll taking.

GOVERNANCE

Distributed ledgers provide an easy way to certify that the backstories of the things we buy are genuine. Transparency comes with blockchain-based

timestamping of a date and location — on ethical diamonds, for instance —that corresponds to a product number.

SUPPLY CHAIN AUDITING

Decentralizing file storage on the internet brings clear benefits. Distributing data throughout the network protects files from getting hacked or lost.

FILE STORAGE

Prediction markets that pay out according to event outcomes are already active. Blockchains are a “wisdom of the crowd” technology that will no

doubt find other applications in the years to come

PREDICTION MARKETS

Smart contracts can protect copyright and automate the sale of creative works online, eliminating the risk of file copying and redistribution

PROTECTION OF INTELLECTUAL PROPERTY

When executed peer-to-peer, trade confirmations become almost instantaneous (as opposed to taking three days for clearance). Potentially,

this means intermediaries — such as the clearing house, auditors and custodians — get removed from the process

STOCK TRADING

FOR MORE INFORMATION

VISIT

HTTP://BLOCKGEEKS.COM/

WHAT IS BLOCKCHAIN

TECHNOLOGY?

A STEP-BY-STEP GUIDE FOR

BEGINNERS